FIRST AMENDMENT AND WAIVER

FIRST AMENDMENT AND WAIVER dated as of October 5, 2005 (this " First Amendment and Waiver "), among Molina Healthcare, Inc., a Delaware corporation (the " Borrower "), the Lenders (as defined below) party hereto, Bank of America, N.A., as Administrative Agent (in such capacity, the " Administrative Agent ") for the Lenders.

The Borrower is a party to an Amended and Restated Credit Agreement dated as of March 9, 2005 (the " Credit Agreement "), among the Borrower, the lenders from time to time party thereto (the " Lenders "), Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the other agents, joint lead arrangers and joint book managers party thereto. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

The parties hereto have agreed, subject to the terms and conditions hereof, to amend and waive certain terms of the Credit Agreement.

Accordingly, the parties hereto hereby agree as follows:

1. 1. Amendments to Section 1.01 . (a) Section 1.01 of the Credit Agreement is hereby amended by deleting the first paragraph and the pricing grid in the definition for "Applicable Rate" and by deleting the definitions for "Fixed Charge Coverage Ratio" and "Permitted Acquisitions" in their entirety and inserting the following in lieu thereof:

"" Applicable Rate " means, from time to time, the following percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b) :

"" Fixed Charge Coverage Ratio " means, for any period, the ratio of (i) the sum of the Borrower's unconsolidated EBITDAR (which includes management fees from Regulated Subsidiaries), plus EBITDAR of Non-Regulated Subsidiaries, plus Net Dividends, less consolidated Capital Expenditures, to (ii) the sum of Borrower Fixed Charges."

"" Net Dividends " means, for any period, dividends paid by Regulated Subsidiaries to the Borrower, less Required Investments in Regulated Subsidiaries."

"" Permitted Acquisitions " means any Acquisition (or series of related Acquisitions) by the Borrower, any other Loan Party or any wholly-owned Subsidiary of the Borrower whose stock is pledged pursuant to the Pledge Agreement (for purposes hereof, an " Acquiring Party " and any such Acquisition (or series of related Acquisitions) a " Subject Acquisition "); provided that:

(a)         in the case of an Acquisition of the capital stock of another Person, the Person to be acquired will be a direct or indirect wholly-owned Subsidiary of the Borrower after giving effect to such Acquisition and the Person to be acquired is in the Health Care Business;

(b)         the Property acquired (or the Property of the Person acquired) in such Subject Acquisition shall be used or useful in the Health Care Business of the Borrower or its Subsidiaries;

(c)         all Property to be acquired in connection with such Subject Acquisition shall be located in the United States of America;

(d)         in the case of an Acquisition of the capital stock of another Person, the board of directors (or other comparable governing body) of such other Person shall have duly approved such Acquisition

(e)         no Default shall exist immediately after giving effect to such Subject Acquisition on a Pro Forma Basis;

(f)          the Subject Acquisition shall not involve an interest in a partnership or have a requirement that the Borrower or any other Loan Party be a general partner or involve a partial interest in any entity or joint venture interest;

(g)         the Acquiring Party shall, and shall cause the party that is the subject of the Subject Acquisition to, execute and deliver such joinder and pledge agreements, security agreements and intercompany notes and take such other actions as may be necessary for compliance with the provisions of Sections 6.13 , 6.14 and 6.15 ;

(h)         (i) if Consolidated EBITDA (as reported in the most recently delivered Compliance Certificate prior to a Subject Acquisition for the four fiscal quarters most recently ended as of the date of such Compliance Certificate) is equal to or greater than $100 million, then (A) the Acquisition Purchase Price for such Subject Acquisition is less than or equal to $100 million, and (B) the Acquisition Purchase Price for all such Subject Acquisitions during any fiscal year is less than or equal to $125 million; or (ii) if Consolidated EBITDA (as reported in the most recently delivered Compliance Certificate prior to a Subject Acquisition for the four fiscal quarters most recently ended as of the date of such Compliance Certificate) is less than $100 million, then (A) the Acquisition Purchase Price for each Subject Acquisition is less than or equal to $25 million, and (B) the Acquisition Purchase Price for all such Subject Acquisitions during any fiscal year is less than or equal to $40 million;

(i)          if (i) Consolidated EBITDA (as reported in the most recently delivered Compliance Certificate prior to a Subject Acquisition for the four fiscal quarters most recently ended as of the date of such Compliance Certificate) is less than $100 million, or (ii) the Acquisition Purchase Price for each Subject Acquisition (or series of related acquisitions) is more than $30 million, then, in each case, the Borrower shall have delivered to the Administrative Agent a Compliance Certificate signed by Responsible Officers of the Borrower demonstrating or describing the following:

(A)        compliance with the financial covenants hereunder after giving effect to the Subject Acquisition on a Pro Forma Basis and compliance with clauses (g) and (h) above and showing that the Consolidated Leverage Ratio on a Pro Forma Basis after giving effect to the Acquisition shall not exceed 1.75 to 1.00, and reaffirming that the representations are true and correct in all material respects as of such date and providing supplements to the Schedules as required by the Compliance Certificate,

(B)        after giving effect to the Subject Acquisition and all Borrowings related thereto, on the date of the Subject Acquisition, there shall be at least $25 million of remaining availability existing under the Aggregate Commitments,

(C)        after giving effect to the Subject Acquisition on a Pro Forma Basis, no Event of Default exists, and

(D)        describing the Person to be acquired, including, without limitation, the location and type of operations, key management and Health Care Business or other assets of such Person, if any;

provided , however , that the Subject Acquisition shall not result in interests in such Person or the property of such Person being directly or indirectly held by or transferred into Molina Healthcare of California or any of its Subsidiaries so long as the stock of Molina Healthcare of California has not been pledged pursuant to terms of this Agreement, except that Molina Healthcare of California and its Subsidiaries located in California, shall be permitted to make one or more Subject Acquisitions in accordance with the provisions set forth in this definition but solely within the State of California, where the consideration therefor is payable (x) solely in the form of common stock of the Borrower or (y) in the form of cash and non-cash consideration in an amount equal to 50% of the amounts set forth in subclauses (h)(i) and (ii) above and otherwise in accordance with such subclauses, but only if the Consolidated Leverage Ratio is less than 1.00 to 1.00; provided that for purposes of clarification the aforementioned sublimits in the proviso shall apply to Molina Healthcare of California and its Subsidiaries and shall reduce the limits stated in clauses (h)(i) and (ii) above by the amount of any cash consideration paid for any such Subject Acquisition."

(b)         Section 1.01 of the Credit Agreement is hereby amended by adding the following new definitions in the appropriate alphabetical order:

"" Borrower Fixed Charges " means, for any period for the Borrower and any Loan Party, the sum of (i) the aggregate amount of taxes paid in cash, plus (ii) interest payable on all Indebtedness for borrowed money, plus (iii) rent payable under leases of real, personal, or mixed property, plus (iv) scheduled principal payments on all Indebtedness for borrowed money."

"" Required Investments in Regulated Subsidiaries " means, for any period, the cash Investments made by the Borrower in the Regulated Subsidiaries, minus initial investments made in Regulated Subsidiaries to finance the costs of acquisition and/or formation, minimum net worth requirements, initial capital expenditures, transaction costs and transition costs, in each case made within 90 days prior to or after acquisition, formation or commencement of operations."

2. Amendment to Section 5.06 . Subsection 5.06(b) of the Credit Agreement is hereby amended to delete the following clause from such subsection: ", if determined adversely," and inserting the following in lieu thereof: ", in the case of any such suit, proceeding, claim or dispute which is reasonably likely to be adversely determined, either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect".
3. Amendment to Section 7.06(e) . Subsection 7.06(e) of the Credit Agreement is hereby amended by deleting subsection 7.06(e) in its entirety and inserting the following in lieu thereof:

"(e)        the Borrower may make any other Restricted Payments so long as, at the time of any such Restricted Payment:

(i)          No Default or Event of Default shall have occurred and be continuing;

(ii)         (A) If Consolidated EBITDA (for the four fiscal quarters most recently ended as reported in the most recently delivered Compliance Certificate) is equal to or greater than $100 million, then the aggregat